Oklahoma City-based Quest Resource Corp. (QRCP) and its related partnerships plan to merge and form a publicly traded corporation focused on unconventional resource development in the Marcellus Shale and the Cherokee Basin.
Still to be officially named, “NewGasCo” would combine QRCP, Quest Energy Partners LP (QELP) and Quest Midstream Partners LP (QMLP), officials said Monday. The merger is expected to be completed by year’s end.
“While much work must still be completed, we believe the proposed recombination makes the Quest entities more competitive in today’s market environment by allowing us to further reduce costs, increase operational efficiency and simplify our organizational structure,” said CEO David C. Lawler.
QRCP and the partnerships have been rocked by scandal in the past year. Former CEO Jerry Cash and former CFO David E. Grose were sued last month by the Securities and Exchange Commission for allegedly siphoning millions of dollars from the company (see Daily GPI, June 18). Cash resigned from the company last August and Grose was fired by the company soon afterward (see Daily GPI, Aug. 26, 2008).
Completing the merger “remains subject to the satisfaction of a number of conditions, including, among others, the arrangement of one or more satisfactory credit facilities for NewGasCo, the approval of the transaction by the stockholders of QRCP and the unitholders of QELP and QMLP, and consents from each entity’s existing lenders. There can be no assurance that these conditions will be met or that the merger will occur,” the company said. If the merger is completed, 44% of the new company would be owned by current QMLP equity holders, 33% by current QELP equity holders and 23% by current QRCP equity holders.
At closing, NewGasCo’s board of directors would be comprised of nine directors, including three existing independent directors of QELP, three existing directors of QMLP, two existing independent directors now on the QRCP board, and the CEO of the Quest entities. Gary M. Pittman, who now chairs the QELP board, is expected to serve as NewGasCo’s chairman. Lawler would continue to serve as president and CEO and would become a board member.
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